Ford redesigning parts for using more accessible chips

Ford Motor is redesigning automotive parts for using more accessible chips in response to the global semiconductor shortage, the automaker’s CEO said on Thursday.

Jim Farley, speaking at automaker’s online annual shareholder meeting, also said the automaker is weighing other strategies for the future, including building a buffer supply of chips and signing supply deals directly with the foundries that make the wafers utilized in semiconductors.

Automakers typically get their chips through their largest providers, not dealing directly with chip makers and the foundries that make the wafers used for assembling the semiconductors.

The chip shortage has caused automakers worldwide to curtail production. Last month, the automaker said the issue would cost it $2.5 billion this year and halve its automobile production in the second quarter, when the shortage will be at its worst. The shortage has forced the automaker at times to idle production of its significantly profitable F-150 pickup trucks.

Farley said on Thursday that about 60% of the chips utilized in the automaker’s vehicles are 55-nanometer or larger, what he called “mature nodes”. He said the supply of those chips was constrained.

Longer-term changes about how the automaker approaches chips are being considered, he said.

“Not only are we redesigning a lot of our components to work with chips that are more accessible … but we think we need to look at buffer stocks, actual direct contracts with some of the foundries,” Farley said. “We think that’s going to be a really critical approach to our supply chain as we get more electronic components.”

Ford Executive Chairman Bill Ford also said on Thursday the automaker will look to reinstate the automaker’s dividend “as soon as possible”.

Ford’s dividend was suspended in March 2020 following the coronavirus crisis in a move to save cash. That saved the company $2.4 billion at an annual rate.